Today's decision by the Premier League's arbitration panel that Kevin Keegan was constructively dismissed at St James' Park in September 2008, and should receive the maximum £2m compensation allowable under his contract, has shone a blinding light on the farcical insides of Mike Ashley's Newcastle United. The key finding of this published judgment, by a legal tribunal including two QCs, is astonishing.

Newcastle United, then a Premier League football club, signed a player on loan, the Uruguayan Ignacio González, whom not one person at the club had ever seen play, as a "favour" to two South American agents. "The loan deal cost the club nearly £1m in wages," the judgment records, "for a player who was not expected to play in the first team."

This is the sort of deal which is rumoured and whispered about in the grimmest conversations about how football really works, yet here it is, advocated by key Newcastle people, including Ashley himself, as a valid way to do business.

Some interpreted Keegan's exit as another walkout by a man with a tendency to flounce, but the judgment vindicates him as a man of pride and principle. As the manager he was not prepared to sanction that signing, which was being urged on him by Dennis Wise, the man Ashley appointed as executive director (football).

The judgment throws up a motley cast of characters arrayed against Keegan, a Newcastle legend as a player and manager, whom Ashley brought back in the hope of reproducing the renaissance of Keegan's first spell. Ashley bought Newcastle then appointed inexperienced people to key positions because, it is said, they were his friends and he trusted them.

Tony Jimenez appears in the judgment to remind us of his short-lived term as vice president (player recruitment). Jeff Vetere, formerly a scout for Real Madrid, Charlton and West Ham, had joined in January 2008 as Newcastle's technical co-ordinator.

The roles of these men combined with Wise, the judgment tells us, into a "structure" which Ashley's people carefully explained to Keegan would be "the continental model" for how to run a football club. The executive director (football) would be on the board and the manager would report to him.

Keegan's argument was that was all very well, but according to the terms on which he took the job, he had the final say on all signings. Then on 30 August 2008, two days before the transfer window closed: "Mr Wise telephoned Mr Keegan and told him that he had a great player for the club to sign, namely Ignacio González."

Keegan found that even Google had no information to impart on González, so Wise told him some footage could be found on YouTube. Keegan looked. "He found that the clips were of poor quality and provided no proper basis for signing a player to a Premier League club," the judgment states. "Moreover, no one at the club had ever seen [González] play."

After that, the judgment records: "Notwithstanding that [Keegan] made it clear not only to Mr Wise but also to Mr Jimenez and to Mr Ashley that he very strongly objected to the signing of Mr González, the club proceeded with the deal. The club did so, according to its witnesses who gave evidence, because it was in the club's commercial interests to do so. The 'commercial interests', according to the club, were that the signing of the player on loan would be a 'favour' to two influential South American agents who would look favourably on the club in the future."

Keegan suggested to the panel that the transfer was "improper and irregular", although the panel found that the club did not pay the agents, and it was not suggested it breached Premier League rules. Most importantly, however, it agreed that Keegan left because he believed, with justification, that his role as Newcastle's manager had been fundamentally undermined with the González deal.

Newcastle, in the detail, put forward an appalling argument. The panel decided that when they appointed Keegan as the manager they did guarantee him the final say on transfers. This conclusion is based partly on what the club itself said in public. The judgment quotes Wise twice, Ashley's first chairman Chris Mort, and Lee Charnley, the club secretary, making press or website statements to that effect.

Yet the club told the tribunal that these statements, that Keegan had the final say, were "simply untrue" and that those officers of the club made them as "nothing more than an exercise in public relations". The panel found that explanation "profoundly unsatisfactory".

Keegan had a contract worth £3m a year, rising to £3.2m then £3.4m for the following seasons. After Newcastle United signed a Uruguayan player whom nobody had seen play, to do a favour to two agents, he walked away. This legal judgment concludes that decision was fully justified, and poses howling questions of Ashley to which, characteristically today, his Newcastle United was making no comment at all.